Four Building Blocks of Trust
Stephen P. Oliver, CFA, CFP®
Trust is an essential element in every relationship, both personal and professional. The need for trust is directly proportional to the importance of the relationship. It is vital to the relationships between friends, between a doctor and patient, and between a client and advisor. As a financial advisor, I realize how critical it is to develop and nurture clients’ trust. Below are some guidelines on the basics of building and maintaining trust.
Sometimes trust is easily, almost naturally, present but typically trust is built over time. To do so, one needs to be aware of its building blocks, the pillars on which trust can be established and grow. The same pillars upon which trust is built are those that can destroy trust in their absence.
We build trust on many things. Here we identify four of these basic building blocks of trust.
- Authenticity – Be real and genuine in words and actions. Be consistent. Maintain intellectual humility. One of the greatest lessons about investments I learned from a farmer whose mantra was that you don’t know what you don’t know. What is true for farming is true for investing. Often those who boldly state that this is the way something is, or this is what will happen, don’t really know. Unexpected things happen all the time. Black swan events happen. Having intellectual humility allows us to be better prepared when they do and build stronger trust with our clients. And when you make a mistake, be upfront and vulnerable to admit your mistakes and describe what you learned from them. Expertise comes from experience.
- Transparency – Identify and communicate biases and conflicts of interest. I learned years ago from a favorite college professor the value of admitting our biases upfront. We have our own mental models of how we see things. Be aware of your mental models and the assumptions inherent to them. Doing this brings honesty and transparency to any relationship. Be honest in your communication and avoid hidden agendas. Share the reasoning behind your recommendations. Communicate the full story or as much as truly necessary. Nothing can break down trust faster than discovering later what was not being said but should have been. Fees are a great example and should always be discussed with perfect transparency and openness. Here is the value being given and received and this is what you are paying. There should be no surprises.
- Listening – Work hard to listen and understand. Whenever someone feels heard, they are better able to listen. If a client calls with a concern, our first job is to listen carefully and understand their concern and not to give advice. How do you do this? Practically this can be done by not responding immediately. Instead, consider asking questions for greater understanding of the reasons, as well as the emotions, influencing their concern. Only then can you begin to give assurance and the advice that is necessary to the client’s situation. When you are having a conversation, picture yourself sitting at a table opposite the person who is speaking. Imagine yourself getting up and walking around to the other side of the table to listen, perceive, and share the experience from the other person’s perspective. Only when the client knows that they have been heard and understood can they be prepared to listen to our advice.
- Dependability – Do you consistently do what you say you are going to do? Establish credibility and reliability, developing a reputation for doing what you said. Be consistent and diligent in this, even with the smallest of tasks. In light of that, be careful what you commit to and promise. Whenever you do, follow through relentlessly.
There are many other characteristics or elements in establishing, or reestablishing trust, such as knowledge, experience, strong interpersonal skills, cooperation, integrity, ability to forgive, and shared experiences. Consider what else is important to you and add it to the list. Whatever you do, build on the trusted relationships you have. The benefits will always be worth the effort.
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